Purpose

To consolidate, disseminate, and gather information concerning the 710 expansion into our San Rafael neighborhood and into our surrounding neighborhoods. If you have an item that you would like posted on this blog, please e-mail the item to Peggy Drouet at pdrouet@earthlink.net

Thursday, March 19, 2015

Risk-related transparency: A double-edged sword

Delivering public sector projects on time, on budget and
with the full set of intended benefits has always been a demanding
business. So would a move to more transparency improve or hinder project
performance and de-risk projects? Alexander Budzier, a lecturer on the
MSc for Major Programme Management at Saïd Business School, a lecturer
at the Major Project Leadership Academy and the co-director of the UK
Government Project Leadership Programme, has conducted an extensive
five-year study into the real drivers behind project performance and
risk. Here, he comments on the findings of the research and the benefits
and pitfalls of adopting a total transparency approach.

The biggest project risks: Not what you might expect

Since 2009, my colleague, Bent Flyvbjerg,
and I have examined more than 6,000 large scale projects (92% in the
public sector and 71% focused on public sector IT change initiatives),
comparing budgets and benefits estimates with actual results. The
results have been surprising – and alarming.

When the figures were fully broken down and not simply averaged out, a
staggering one in six projects ended up in the “fat tail” of budget
overruns of more than 50% and schedule overruns of more than 70%. These
statistics question previous studies that focus on average performance
and talk of overruns as excusable error. Our data point to a picture
where projects are generating a disproportionate – and disastrous -
number of very large overruns that must be addressed.

Risk drivers: Are we getting it right?

Often, the size and duration of a project is considered the primary
driver of risk. In the UK, it’s the largest 400 projects that sit on the
Major Projects Authority register and are closely scrutinised. But our
findings prompt other key risk considerations. Is the organisation
strong enough to absorb the hit if budget overruns turn out to be
extraordinary? Can the organisation still cope and deliver if 15% of its
medium-sized projects exceed cost estimates by 200%? These numbers may
seem unlikely, but 5 years of research has shown that they are frequent
and realistic. Any publicly accountable organisation needs to know what
its specific risk in the “fat tail” is.

Then we must consider the robustness and availability of data. If
public sector executives don’t have full confidence in their data, that
seriously impacts on their ability to make decisions. Particularly
during the early project life cycle little is definitively known about
the project because, by definition, the project design hasn’t reached
maturity. But decisions that will lock the project into a course of
action must still be made. We must be mindful of such shortcomings in
the data and how to navigate them when examining risk and make
decisions.

Can public transparency drive better risk management?

Of course, in the US, transparent publication of project details is de rigeur.
Should we be striving for the same in the UK? And how would that new
level of accountability drive behaviours and decision making in the
public sector?

We’ve already made a move to de-risking projects through optimism
bias uplifts, mandatory for big public projects in the UK. The MPA is
moving towards more openness. Taking the principle of project comparison
to the point of total transparency, though, carries inherent risks. The
biggest of these is that you inevitably change the accountability
landscape. That will influence behaviours – sometimes with negative or
unintended consequences. We have studied in detail the beneficial and
adverse consequences the move towards transparency had in the US.

Transparent public reporting also relies on robust, high quality data
(which, as we have seen, can be problematic) and can involve a
significant administrative burden. That creates a high level of resource
consumption which could arguably be better deployed to maximise the
benefits of the project. What’s more, an admission of failure in the
public space can destroy the credibility of a project – and of other
associated projects, potentially affecting investment, delivery and
outcomes.

On the other hand, if data is made available across projects in a
more consistent manner then that data can be used pro-actively. As well
as reporting accurately, we can also start to map early warning
indicators to identify high risk areas. That in turn will accelerate
risk issues into the governance structure and alert people higher up in
the hierarchy to possible areas of concern. Total transparency
potentially equips us to widen the view from individual projects to the
entire portfolio, prompting better decisions, innovation of project
delivery and better outcomes.

We tend to assume that transparency is
inherently a “good” thing. Certainly, one cannot address the risks on a
project if they are not visible. What is undoubtedly important, given
the results of our research, is that we engage in a new conversation:
one that brings risk-related transparency to the table and honestly
recognises the benefits and potential drawbacks of a total transparency
approach.